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Dominant Performance Of The Yen & The USD

The US Dollar and the Japanese Yen, following the dominant thematic of this week, emerged as the top performers once again on Thursday. Only the Canadian Dollar, late in the day, was able to keep up. The Euro gave back the previous day's gains as the ECB sounded more dovish while the Pound was out of favor too this time. The Kiwi and the Aussie, after the overstretched moves from Wednesday, and with equities in 'yo-yo' mode, managed to put up a fight. 

Let’s get started…

Scan Of The Markets

To see an expanded version, right-click and select ‘open link in new tab‘. The indices show the performance of a currency vs a G8 FX basket. 

The US Dollar and the Japanese Yen, following the dominant thematic of this week, emerged as the top performers once again on Thursday. Only the Canadian Dollar, late in the day, was able to keep up. The Euro gave back the previous day’s gains as the ECB sounded more dovish while the Pound was out of favor too this time. The Kiwi and the Aussie, after the overstretched moves from Wednesday, and with equities in ‘yo-yo’ mode, managed to put up a fight.

When analyzing the ECB policy decision, in a nutshell, the initial outcome was in line with expectations with rates and bond buying kept at current levels. However, it was the intervention by President Lagarde that caused the most damage to the Euro as she put on her ‘dovish hat’ by clearly hinting at increased stimulus at the December meeting. Other negative comments included that the near term outlook has deteriorated amid the spike in COVID-19 and tougher social restrictions as the recovery is losing momentum.

Another big story that should simply come as an anecdote but nonetheless worth highlighting is the resurgence in US GDP growth. President Trump will probably be boasting the record 33.1% jump even if the number remains below pre-pandemic levels and we should not forget this number comes on the back of a dramatic fall of -31.4% in the previous Q2 GDP, so one must put things into perspective. Besides, we had better-than-expected jobless claims at 751K.

With regards to today’s hot trade of the day, shorting the British Pound against the almighty Japanese Yen was one of the best trades one could have found in the previous European session. One would have been pairing the strength of the Yen against the neutral performance of the Pound, which when combined had resulted in a firm bearish trend to exploit in the pair off both the 4h and daily timeframes. A trap pattern off the 15m timeframes was the final trigger for a sizeable risk reward.

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Hot Trade Of The Day

To see an expanded version, right-click and select ‘open link in new tab‘. In this section I pick a market or several ones that presented an opportunity to buy on weakness or sell on strength based on the higher timeframes outlook. My video analysis below will further elaborate on the logic behind the trade.   

Insights – Hot Trade Of The Day

In this video analysis I dissect the information above. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter and manage a position, hence the video is intended as educational in nature and not financial advice. 

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Recent Economic Indicators & Events Ahead

Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Important Footnotes

MARKET STRUCTURES

Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to this video. Fractal breakouts is at the epicenter to assist us in the analysis of chart structures.

MARKET MOMENTUM 

In order to assess the market momentum of a particular asset, I’ve promoted for years the idea of using what I call the smart money tracker. The settings and the indicator can be obtained via our Discord room, where traders from all walks of life interact frequently. In this video I lay out the elements I look into to call trend directions.

PROJECTION TARGETS

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection

About the author

Ivan Delgado

Ivan Delgado is a decade-long Forex Trader. Feel free to follow Ivan on Youtube. Join thousands of traders who follow Ivan's insights to increase their profitability rate by learning the ins and outs of how to read and trade financial markets. Ivan has you covered with in-depth technical market analysis to help you turn the corner.